1993 (4) TMI 98 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the CIT to invoke provisions u/s 263.
2. Nature of the documents: Lease deeds vs. Sale deeds.
3. Validity of assessments made u/s 143(1).

Summary:

1. Jurisdiction of the CIT to Invoke Provisions u/s 263:
The CIT initiated proceedings u/s 263, arguing that the acceptance of returns without scrutiny u/s 143(1) was erroneous and prejudicial to the interests of the Revenue. The appellants contended that the CIT had no jurisdiction to invoke u/s 263 for assessments completed under the Summary Assessment Scheme as per Instruction No. 1617 and Circular No. 176. The Tribunal upheld this contention, stating that the CIT is bound by the Board's instructions, which reflect the Government's view that no remedial action is necessary in summary assessment cases. The Tribunal cited precedents, including Navnit Lal C. Javeri v. K.K. Sen, AAC [1965] 56 ITR 198 (SC) and Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 (SC), to support the binding nature of such instructions on the CIT.

2. Nature of the Documents: Lease Deeds vs. Sale Deeds:
The CIT argued that the documents styled as lease deeds were, in substance, sale deeds, making the assessees liable to tax on capital gains. The Tribunal examined the terms of the documents, including the 99-year lease period, the substantial advance payment, and the option for BEML to purchase the flats for a nominal sum at the lease's termination. The Tribunal concluded that the documents contained all essential elements of a lease as per section 105 of the Transfer of Property Act, 1882, and did not transfer ownership of the flats to BEML. The Tribunal referred to several Supreme Court decisions, including CIT v. Motors & General Stores (P.) Ltd. [1967] 66 ITR 692, to emphasize that the legal effect of the documents should be determined by their terms and the parties' intentions, not by the substance of the transaction as perceived by the CIT.

3. Validity of Assessments Made u/s 143(1):
The Tribunal noted that the Income-tax Officer had followed the Board's instructions in accepting the returns u/s 143(1) and had not committed an error. The Tribunal cited the Calcutta High Court's decision in Russell Properties (P.) Ltd. v. A. Chowdhury, Addl. CIT [1977] 109 ITR 229, which held that an Income-tax Officer cannot be faulted for following a higher authority's decision. The Tribunal also referenced the conduct of the parties, including BEML's confirmation that the lessors were the legal owners of the flats and the absence of any claim by BEML to ownership in subsequent legal proceedings, to support its conclusion that the documents were lease deeds.

Conclusion:
The Tribunal set aside the CIT's orders, holding that the assessments made u/s 143(1) were not erroneous or prejudicial to the interests of revenue. The appeals were allowed.